The tax law for a code M means that the the money can be "rolled" into an IRA. It is not a contribution but a rollover. The money he obtained for the loan can be put into an IRA as a rollover of that money. Money is fungible so it makes no difference what the actually dollars come from.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
